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Investing in stocks is an excellent way to gain income through both interest and company payouts, but you have to know what you’re doing. Diving into the stock market headfirst is often a great way to lose everything.

One area that more conservative investors tend to place their money in is income stocks. What differentiates these from others you could choose from, and how much money could you stand to make from your investment? Here’s the nitty-gritty on the income investing, and how to pick out companies worth your while.

Key Terms to Understand

If you’re new to the world of trading stocks, then there are a few terms you will need to know in order to better understand income stocks. Here’s a quick vocabulary lesson for the stock market.

Volatility – This refers to how rapidly a stock’s price fluctuates. Low volatility means that prices do not change quickly, raising or lowering by a small amount. High volatility means that a stock could go from five dollars to a thousand overnight, but then plummet down to forty-four cents in an hour.

Dividends – This term is used to describe payments made by a company to their shareholders. Cash dividends are often paid out each quarter or annually.

Yield – This is merely the income return on your investment in interest or dividends.

Dividend Yield – This is a ratio indicating how much a company pays its shareholders each year compared to its share price. It is represented as a percentage, with higher numbers indicating larger payouts.

Capital Investment – These are funds invested in a company that allows them to further their operations or purchase assets such as machinery and equipment.

What Is an Income Stock?

Income stocks are equity securities that pay regular dividends. Often, these dividends steadily increase to offer a higher than market yield, generating the majority of all your returns. The majority of these stocks have low levels of volatility when compared to the rest of the stock market as well.

They may have limited future growth options, which equates to a lower level of ongoing capital investment. This also allows companies to take their excess cash flow from profits and direct them back to investors on a more regular basis.

While you can find income stocks in any industry, the majority are located within the real estate market in the form of REITs (real estate investment trusts). You will also find them in energy sectors, utilities, natural resources, and financial institutions such as banks.

An ideal income stock has:

  • Very low volatility
  • A dividend yield higher than prevailing 10-year treasury bond rates
  • A modest level of annual profit growth
  • A history of increasing dividends on a regular basis to keep up with inflation
Why Choose An Income Stock?

How to Build a MASSIVE DIVIDEND PORTFOLIO - YouTube

Based on the higher dividend yield, investors have the opportunity to make a yearly profit off of these stocks. They are similar in nature to fixed-income securities, such as bonds and CDs, but come with the chance of a higher return on investment. Ideally, the goal is to create a steady income stream through dividends.

To make a profit off of income stocks, you have to identify companies that are worth the initial investment. That can be a tricky endeavor, but there are certain aspects to keep an eye out for.

Getting Paid

Not every company pays a dividend with their excess cash flow. To build a portfolio of income stocks, the companies you choose have to make cash or stock payments back to you during the year. Companies who earn a profit during a fiscal year can choose to:

  • Reinvest the money into themselves for expansion, debt reduction, or share purchases
  • Pay a portion of the profits to shareholders
  • Reinvest a portion and pay out the rest

New companies in quickly expanding industries are less likely to pay you a part of their yearly profits because they need the money to keep growing. They might use the funds to purchase more assets or begin work on a new project instead.

Mature companies may not pay out dividends either. Many choose to repurchase share prices in order to acquire another company or feel that reinvesting into the company provides a long-term benefit to investors.

You are more likely to find adequate dividends being paid out by older, established companies that have already reached their maximum potential for growth. These companies will more than likely use funds to keep their assets up to date, which leaves a lot of room to give back to their shareholders and make their investment worthwhile.

Dividend Dollars

At first glance, you might think that a higher payout is the perfect type of stock to buy. However, smart investing requires you to look at the dividend yield. You can calculate this percentage by taking the previous year’s dividend and dividing it by the current stock price.

Dividend Yield = Annual Dividends Per Share/Price Per Share

To make things easier, you can use a unique calculator to help determine what the percentage is. The higher the rate, the more money you stand to make annually.

For example, imagine that a stock is trading at $10 per share with an annual dividend of $1 for each share held. That makes the yield 10%. Increase the price to $20, and the yield decreases to 5%, while a stock price of $5 would make the yield 20%.

That’s just an example made easy for calculation purposes. You will usually find dividend yields ranging between two and five percent. If a company has steadily paid out 4% over the past ten to twenty years, then you can make a safe bet that they will continue to do so. That’s what you want to look for when purchasing income stocks.

Choosing the Company

Peter Lynch - How to Pick Winning Stocks for Beginners - YouTube

Just because a company has high dividend yields does not necessarily mean they make a good investment choice. Some companies offer higher dividends to attract investors, then end up sinking because those funds should have been reinvested.

Your stock is only worth something if the company is sustainable. Take a close look at the company before making a final decision, ensuring that they have a solid business model and a proven track record of success.

There is, unfortunately, no way to determine which companies are better than others outside of prior performance statistics. You will have to use your best judgment in deciding which companies will stand the test of time, offering the best return on your investment.

You can find dozens of companies that have both paid out high dividend yields and grown exponentially over the years. Johnson & Johnson, for instance, saw its investments appreciate over 200 times in 20 years. Start by using a stock screener to find higher yields, then analyze the company to the best of your ability.

Assessing Risks

No matter which companies you choose, high dividend yields or not, there is always a risk assumed when investing funds. Stable, long-standing companies are an excellent option if you are looking to minimize your risks, but there are never any guarantees within the stock market.

Just like any equity security, the liability may outweigh the value of the assets. Minimizing risks can be tricky, which is why starting with companies that have a tried and true business model is recommended.

Don’t Forget About Uncle Sam

When April rolls around, you might be wondering how income stocks will affect your taxes. Any payments received through dividends are taxed at the same rate as your wages, essentially adding to your gross income for the year. This remains true on the national, state, and county level in most cases.

Since these payments are taxed at a higher rate than capital gains, your overall return will be reduced. Income stocks can still produce a steady stream of income, but remember that it is an income. Save yourself a headache in April and set aside a portion of your payments for your taxes each year.

Compared to other stocks, income options tend to pay more steadily. Even with the taxes you’ll owe, you still stand to make a higher return so long as the dividend yield is in the mid to upper percentage range. That’s not to say that you couldn’t get lucky with a standard stock purchase, but there’s less of a gamble involved with income stocks.

A Second Income

Income stocks offer the ability to increase your yearly earnings through essentially a second income. With a higher return on investment than bonds and CDs, you stand to make a pretty penny when investing wisely.

Remember to do the math on dividends, thoroughly research the company, and assess your risks before making any final decisions. Play your cards right, and you just might be on your way to an early retirement. Again, don’t forget about taxes!

The post Getting Started: What Are Income Stocks and What Do I Need to Know? appeared first on Dividend Mantra.

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Thinking about investing? Here are our choices for the best dividend stocks for 2018, including an overview of each company we recommend.

Dividend stocks are one of the most effective ways of investing your money - in fact, with their relatively safe and steady return, it's possible to entirely live off of your dividends if you can buy enough of them. In this guide, we're going to take a look at our top 10 choices for dividend stocks to buy in 2018.

Best Dividend Stocks For 2018: Quick Comparison Table

NAME OF stocks

Our Rating

Dividend yield

Details

Spectra Energy Partners, L.P.
7.7%
Iron Mountain Incorporated
7.3%
W.P. Carey
6.7%
Brookfield Renewable Partners
6.5%
Ventas, Inc.
6.2%
Tanger Factory Outlet Centers
6.0%
PPL Corporation
5.9%
AT&T
5.4%
National Retail Properties
4.9%
Duke Energy
4.7%
How We Chose These Stocks
Dividend Investing! - Dividend Stocks! - YouTube

There are three major factors we took into account when determining which stocks to include on this list.

First, it must provide a dividend yield above 4%. Most dividends don't offer this much, but higher is always better as long as the stock itself is safe.

Second, it should be increasing its dividend. This isn't required if a stock has a good rate and has consistently paid out the dividend, but it's always good to see a dividend going up. If the company is likely to cut the dividend in the near future, we stayed away.

Finally, the company should be consistent about payments. Predictability is vital, and companies that have provided steady dividends for many years are, in most cases, likely to keep doing so. Past performance never guarantees future performance, but in settled markets, it's worth looking at this.

Unfortunately, we don't have the space to go into a complete analysis of each of these recommendations. As always, we encourage you to do independent research on each of our suggestions to ensure they're good buys for your needs.

Related Post: What Are Cyclical Stocks and When Should You Invest?

What's a REIT?

REIT stands for Real Estate Investment Trust. These are companies that own significant amounts of real estate (sometimes 1000 or more properties), and legal requirements - mainly paying out 90% or more of their income to shareholders - makes them ideal sources of dividends. Many of the stocks on this list come from REITs. For more information on REITs, click here.

Why Do Utility Companies Show Up A Lot?

Utility companies (such as electricity and gas suppliers) are effectively state-controlled monopolies. They provide a service but have little control over pricing and natural limits on how quickly they can expand. As such, much of their profit is often distributed to shareholders. Along with REITs, utility companies offer some of the best dividends on the market.

The Best Dividend Stocks For 2018

Here are our picks for high-yield dividends this year.

Spectra Energy Partners, L.P.

Spectra Energy Partners is an infrastructure company focused on oil and gas, especially through their pipelines and storage facilities. Most of the company's revenue comes from reservation fees that customers place to get capacity on their pipes and in their storage facilities. A small amount (>10%) comes from direct usage by customers.

What makes this stock good for dividends is their long-term business model. Most contracts last at least eight years, and the pre-arranged pricing makes the company largely immune to volatility in prices. Also, their physical pipelines are extremely difficult for a competitor to duplicate, making it unlikely the company will have challenges in the near future.

STOCKs
dividend yield
Our Rating​

NYSE: SEP

7.7%

Pros

  • high dividend yield
  • stable company 
  •  focus on long-term business

Cons

  • Company processes needs improvement 

Between the high dividend yield and the prospects for growth, Spectra Energy Partners is easily one of the best dividend stocks for 2018.

Iron Mountain Incorporated

Iron Mountain Incorporated is a real estate business service that focuses on storing and protecting information for customers. Their facilities include everything from standard files and business documents to more sensitive and esoteric items, like art and medical information. More than 80% of their profits come from their storage services, with small amounts coming from shredding and data management.

STOCKs
dividend yield
Our Rating​

NYSE: IRM

7.3%

Pros

  • high dividend yield
  • minimal capital expense 
  •  focus on long-term business

Cons

  • Global competitiveness is still on process. 

The company's real estate covers over 80 million square feet in 40 countries, with most of its customers being Fortune 1000 businesses. Running these facilities requires minimal capital expense, and the long-term nature of storage and customer relationships (with many customers sticking with them for 50 years or more) makes the company fairly predictable.

W.P. Carey
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The traditional way to make money is to get a good education and find a job that pays a good salary. However, you can make extra income by investing in certain stocks and earning a dividend income. If your stocks do well, the extra income could be reinvested or saved for retirement.

How to Earn Dividend Income

The main way to earn dividends it to invest in stocks that regularly pay them. Making dividends through investments can be difficult because the companies whose stocks you bought need to make a profit. Then, the companies decide how to use their profits, such as buy back stock or send money, dividends, to each of their investors.

Investors who make money through dividends look for companies that are likely to increase their dividend amounts each year. Ideally, as a company’s profits grow, the dividends they pay out should increase in value.

The money earned from dividend inome can be used for anything the investor wishes. It can be set aside in an IRA, used to pay bills, or reinvested. The more shares of a dividend stock that you own, the more money you will make if they clear a profit and decide to pay out dividends to their investors.

The Process of Making Dividends

Trading 101: What is a Dividend? - YouTube

There are several steps that you should take to try to make dividends from the stocks you’ve chosen to buy.

Research Dividend Stocks

The first step in dividend investing is to choose stocks that make dividends, especially those that have increasing dividend amounts every year. A good way to begin your research is to look at a list of stocks and look under the “YLD” column, which is its dividend yield.

5 Stocks that pay SICK Dividends! - YouTube

A dividend yield is a calculation of a company’s annual dividends which is divided by the current stock price. The calculation will yield the annual percentage rate of that stock’s dividend.

If you are new to investing, you can research stocks and make a list of those that have earned dividends each year and discuss them with a stockbroker. Be honest with the broker and let them know you are interested in dividend investing. He or she can help you select the best stocks to accomplish your goals.

How to Find Dividend Stocks

The best way to search for stocks that pay dividends is to use some of the tools that are available online. If you open a brokerage account, they usually have tools with information about stocks that have paid dividends and the dates that they were paid.

Companies who have paid dividends are required to report them to the United States Securities and Exchange Commission (SEC) via the Form 1099. The information includes the quarterly and yearly dividends paid the previous year.

Both the NASDAQ and New York Stock Exchange also have tools that provide dividend information. Information from the NASDAQ includes a dividend calculator, history information, and a way to screen for high-yield dividends.

The NYSE provides historical dividend information for stocks by searching previous dividend payments during a certain date range. This information can help you find the best dividend stocks in which to invest.

Other Factors to Consider

To try to ensure that you make dividend income, there are other factors to consider when choosing dividend stocks.

Company’s Debt

When choosing stocks, you want to invest in companies with lower debts, or liabilities, than their competitors or the industry’s average. If a company is deeply in debt, they are going to be paying more of their profits to lenders instead of to their investors. The information regarding a company’s debt will be on their annual report.

Research Earnings Share

A company’s earnings per share can provide information about their financial health. The earnings per share tell how much profit a company has made and to each share of its outstanding stock. The information is easy to find because it is included in the company’s annual report, which is on their website.

When you find the earnings per share, also look up the dividend per share they paid out. This information is also found in the company’s annual report. The dividend per share shouldn’t be any more than 80% of the earnings per share. If it is more than 80%, then it could be a sign that the company is not doing well financially.

Check Companies Current Ratios

Another way to judge a company’s financial health is to compare the ratio of their assets to their liabilities. This ratio shows the company’s abilities to pay their short-term debts. The information is easy to find as it is listed on the balance sheet of the annual report. If their current ratio is greater than one, then the company is doing well.

Buy Stocks with High Dividends

Dividend Investing! - Dividend Stocks! - YouTube

After researching dividend stocks chose those that have shown good profits over the last five years and who have a history of paying out high dividends. Then, consult with a broker as they will be the ones placing the orders for you.

The orders can be placed via a broker that you hire to handle your investments or, if you have some experience with the stock market, you can open an online brokerage account. Even though you are choosing the stocks to buy, a broker is the one placing the orders through the NASDAQ or NYSE.

There will be fees for placing orders, so look up what they are before choosing the stocks. Before opening an online brokerage account, read all the information you can about each one, compare their fees, and select one from which to place orders. If you’re new to the stock market, consider going through a stockbroker instead in case you have questions about your investments.

Managing Your Money

When you’re investing in dividend stocks, you need to be smart about managing your financial accounts. You want to spend less money than you earn from dividends, so when you receive them, pay yourself first. Set aside some of the money in an IRA or money market account, then use the rest to purchase more stocks.

You should plan to save about 10% of the dividends you make. So, if you earn $4,000 per year in dividends, reinvest about $3,895 of that amount. If you’re getting paid dividends each month, do the same thing. By reinvesting the money, you could end up making significantly more income each year.

Create Emergency Fund

Stocks don’t always do well despite the solvency of a company. To help offset losses in the market, keep a year’s worth of expenses in a savings or money market account. If there is a downturn in the market, your savings will help you meet your financial obligations.

When you need to dip into your emergency fund to pay expenses, make sure to replace the money. If you pay out $45,000 per year in expenses, you should have that much in your emergency fund. If you need to spend some of it, always replace it, so you are prepared for the next emergency.

Invest Excess Savings

If your savings start climbing above a year’s worth of expenses, take the excess and invest it in stocks. You could buy more of the dividend stocks that are doing well in your portfolio, or you could diversify and buy other stocks.

Another way to use the excess money is to open a retirement account. Having an Individual Retirement Account, IRA, allows you to save money for your retirement outside of an account that you may have with your job. Most people do not spend 20 or 30 years at the same job anymore, so having an IRA is a safety net you can use for your retirement no matter where you’re working.

Track Purchases

Create a spreadsheet to keep track of the stocks that you buy. Include information like:

  • The price paid for the stock.
  • The dividend yields for each stock.
  • The price stocks sold for if you sold any of them.
  • Income you made from the stocks.
  • Losses you might have had.

Much of the information on the spreadsheet can be used for tracking how well your investments are doing, but it will be needed for tax purposes too.

Create Cash Flow Budget

You need to keep records of how much you’re making from your investments. The budget should list your expenses, the income that is projected for each stock you’ve bought, and income from other sources, such as your job.

If the income you make each month from your job and dividends cover your expenses, you should be able to reinvest some of the profits that you’re making. However, if you’re not doing well, you can consult with your stockbroker or make adjustments to your portfolio.

Before putting any money into the stock market, take the time to research all the factors listed above. Use the free tools at your disposal and read all the information you can about the stocks in which you’re interested to see if they have the potential to provide you with a dividend income.

The post Setting Yourself Up with Dividend Income appeared first on Dividend Mantra.

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If you have investments, it is important to understand about stock prices, how they fluctuate and earn or lose money. One of the main figures you should understand is the total return rate of your stocks. Although the total return formula may seem complicated, if you take time to understand what it is and use a calculator, it can give you the value of your stocks.

What is the Total Return Formula?

The total return of a stock or portfolio of investments is its value, or rate of return, over a certain time. Most stock evaluations are done for a one-year period. When calculated, the result is a percentage of the amount of money that was invested.

The value of the stock includes its interest, capital gains, dividends, and distributions over the time period that is evaluated, such as one year. There are two categories of returns: income and capital appreciation.

The return for income includes the interest that is paid by fixed-interest investments, dividends, and distributions. Capital appreciation is the change in the market price of assets. So, if you have stocks that increased in value, then the difference between what you bought them for and their current value is their capital appreciation.

Importance of Total Return

Being able to calculate the total return of your stocks is important for knowing how their value changed in a given period of time. The total return can be evaluated for a stock over a year, five, ten years or any amount of time you choose. When it comes to taxes, the total return needs to be evaluated for the previous year to determine if it has increased in value.

If it has, then you may need to pay capital gains taxes if you sold any of your shares. Also, if you were paid dividends on any of your stocks, then you may need to pay taxes on those dividends. Since the total return looks back to evaluate a stock’s value, it cannot determine its future value.

Calculations for Returns: The Total Return Formula

There are many calculations that you can learn to determine the value of your securities, including the total return formula. There are formulas to calculate:

  • Total Returns
  • Annualized Total Returns
  • Simple Returns
  • Compound Annual Growth Rate
Total Return Calculation

Calculating the Total Return on a Stock - YouTube

The calculation of an asset’s total return is simple. If you’re calculating the return of a stock for one year, it is:

(The asset’s value at the end of the year – the value at the beginning of the year) + dividends/value of the investment at the beginning of the year = the total return.

A simple example would be if a stock were purchased for $4,000 and now it’s value is $4,500; you have a gain of $500. If you had dividends in the amount of $175, then the total return would be calculated as:

($4,000 – $4,500) + $175/$4,000 = Total Return.

$500 + $175/$4,000 = Total Return.

$675/$4,000 = Total Return.

0.16875 or 16.88% is the total return of the stock at the end of the year.

For each stock that you have, you can use this formula to evaluate their total returns for the year. If your stock had a loss, the same formula would apply. So, in this example, if the value of the stock at the end of the year were $3,750, the total return would be calculated as:

($4000 – $3750) + 0/$4,000 = Total Return

If the stock experienced losses, then it is unlikely you would be paid dividends on it so that you would use the value $0 for dividends.

($250) + $0/$4,000 = Total Return

$250/$4,000 = Total Return

0.0625 or 6.25% would be the total return of the stock using the total return formula if it had losses during the previous year.

Annualized Total Return Calculation

An annualized total return is the amount of money an investment earns each year over a certain time period. For instance, if you wanted to know the total return of a stock for five or 10 years, you would use the calculation for the annualized total return.

The annualized total return is a good figure to know when you’re looking for stocks in which to invest. It looks at its past performances over any given time frame. The formula can be used to look at a stock’s performance for any given number of days as well.

The formula for calculating the annual return percentage, which is often expressed as the annual percentage yield, or APY is:

APY = ((initial price paid for stock + gain) / initial price paid) ^ (365/days) – 1

For example, if the initial price paid for the stock, known as the principal, was $5,000 and it made $1,500 over two years, we could figure out the annual return rate.

APY = (($5,000 + $1,500) / $5,000) ^ (365/730) -1

If you’re not great at math, you can find an annualized total return’s calculator online. Using the example above, we get an annualized total return of 12.29%.

There is also a calculation using annualized total return to try to project the returns into the future. The calculation is:

PR = (principal + gain) (1 + APY) ^ Y (which is for the number of years).

In our example, if we wanted to know what the value of the stock would be 15 years from now, the formula is:

PR = ($5,000 + $1,500) (1 + 12.29%) 15

PR = $28,450.26

You can use an online calculator to find this total as well. If you don’t know the inflation rate or tax rate, you can set those to zero.

Simple Return Calculation

A simple return gives you the return on your investment after you’ve sold the stock. It is easier to calculate than the annualized total return. The formula is:

Net proceeds + Dividends / Cost Basis – 1

The net proceeds would be what you initially paid for the stock, along with the fee paid for the transaction, plus the selling price of the stock along with its transaction fee. So, if a stock was purchased for $2,000 plus a $10 transaction fee the cost basis is $2,010.

If you then sold the stock for $2,750 minus the $10 transaction fee, the net proceeds are $2,740.

If you were paid a dividend of $110 on the stock, that would be added to the $2,740 for a total of $2,840. That amount is then divided by the cost basis, which is $2010 to get 1.41. That amount is – 1 for a total of 0.41 x 100 to get the percentage of 41%

$2,740 + $110 / $2,010 – 1 = 41%

This calculation doesn’t account for how long the stock was held, it is merely the return after you’ve sold it.

Compound Annual Growth Rate Calculation

If you’ve held onto a stock for several years, then you may wish to know its annual rate of growth. While an annualized 12.29% growth rate, such as in the example above, is good for two years, over a 10-year period it isn’t quite as good.

To calculate the compound annual growth rate, CAGR, divide the current value of the stock by its value when it was initially bought. Then, the result will be raised by the power of one divided by the length of time in question. You would then subtract that result by one. It would look like this:

CAGR = (current (or ending) value of stock / initial price of stock) ^ (1/# years) – 1

So, if you initially paid $2,500 for the stock and the ending value is $4,250, and you held the stock for 10 years, the calculation would be:

CAGR = ($4,250 / $2,500) ^ (1/10) – 1

CAGR = 5.45%

Use this calculator to find out the CAGR for your stocks if you’ve held them for more than one year. This figure is the yield of an investment after it has been compounded each year. In the example, the stock rose in value, but a 5.45% may be considered poor for the amount of time the stock was held. Ideally, you would look for a higher rate of return on your investments.

Knowing how to perform these calculations is important for knowing how well your stocks are doing and the information may be needed for your tax returns each year. It can also help you decide when to sell a stock you’ve held onto or whether to reinvest in it when you make dividends on some stocks.

Even if you’re not a math whiz, there are several tools online that you can use to calculate these formulas and get the information about your investment performances. While your broker or online account can provide these figures for you, it is important to know the calculations to understand how the numbers are achieved.

How To Invest In Stocks For Beginners - Ways To Make$1,700 To $2,300 Per Day ! - YouTube

Whether you have a few stocks that you’ve inherited or are a serious investor trying to earn money for retirement, you should know how to calculate the total return formula, as well as these others, to keep track of your investments.

The post Learn the Total Return Formula and Why You Need to Use It appeared first on Dividend Mantra.

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Cyclical stocks are a type of security strongly affected by the overall performance of the market. This is in marked contrast to steadier options, like dividends from companies whose stock price doesn’t change much.

What is a Cyclical Stock? - YouTube

What Types Of Companies Tend To Sell Cyclical Stocks?

Cyclical Stocks are usually associated with companies selling largely-discretionary items like airline tickets, furniture, clothing, and restaurants. In a strong economy, people have more money to spend on luxuries and comforts they don’t need. When the economy gets worse, people quickly stop buying these things, leading to a drop in profits and stocks alike.

Note that some aspects of these industries are less cyclical than others. For example, even if a family can’t afford a new car, their circumstances may drive them to purchase a used vehicle (for a lower price).

Products and services targeting the middle of the income spectrum tend to be the most volatile. Wealthier customers are insulated from market changes and tend to keep buying luxury goods even in the midst of economic downturns, while bargain sellers may see more business than before.

Are They Split In Any Other Ways?

Yes. In general, cyclical stocks are associated with companies producing durable products, non-durable products, and services.

A durable product is something that’s expected to last for at least three years. This typically includes larger items like furniture, appliances, and vehicles. Overall purchases of durable goods are considered a key indicator of the economy since many of them are too expensive to buy on a whim.

Non-durable products are expected to last for less than three years. This includes things like clothes and many items found in retail stores, from food to makeup. Many non-durable products aren’t cyclical themselves – everyone has to eat, regardless of how the economy’s doing – but the companies selling them may see less business during downturns.

Finally, the services category covers everything not associated with physical products. The most volatile areas here include sections like leisure and entertainment, which people are more likely to cut back on during a downturn. Travel is one of the sectors quickest to fall when things turn bad, but it’s also one of the fastest to return as people with new jobs and better pay start looking at vacations.

How Should Cyclical Stocks Be Included In My Portfolio?

That depends on your goals. Cyclical stocks offer high growth potential because they tend to outperform the market as a whole when the economy is doing well. In the same way, they tend to underperform the market when things are bad… and in each major downturn, some of them will fail entirely.

In most cases, cyclical stocks should be mixed with at least some non-cyclical stocks. This reduces the volatility of the portfolio while still offering the potential for growth. Also, timing is everything. If you can catch the market at a low, you can invest heavily, then sell once you think the market has reached a high point.

That money can then be switched over to a non-cyclical stock in preparation for the next downturn. In other words: buy low, sell high. While past performance is never a guarantee of future performance, it’s good to look at companies that have weathered other economic downturns – or, better, have a plan in place to endure the storm and come out strong.

How Risky Are Cyclical Stocks?

In general, cyclical stocks are very risky. They swing wider than the rest of the market, so they need to be actively managed to reap their benefits. You may hold on to them for several years, but cyclical stocks are not a good long-term investment.

Many people move away from cyclical stocks as they age, preferring to focus on investments that offer more predictable returns as they approach and enter retirement. This is especially important because it’s hard to predict ups and downs in the market too many years in advance, and you risk being stuck with a significant loss if you wait too long to sell a cyclical stock.

How to Profit from the Cyclicality of Mining Stocks - YouTube

What Are Some Examples Of Cyclical Stocks?

Now that you know what cyclical stocks are and how to invest in them for maximum rewards, let’s take a look at some of the best-performing choices.

#1: Walt Disney, Co.

“Disney is cyclical”, you ask? Of course, it is – their business is entertainment, and that’s precisely what people cut down on during economic downturns. What makes Disney so attractive as a cyclical stock is their unique market position. Aside from their primary movie line, Disney owns a number of other major studios, operates theme parks, licensed products, and generally spreads itself out.

Statista notes that the total assets of the Walt Disney Company are near 100 billion dollars, and continued to climb straight through the Great Recession. There’s no reason to believe Disney will stop its growth – or be in danger of failing – anytime soon. This makes it an excellent buy when its stock price is low.

#2: General Motors Co.

General Motors didn’t make it through the Great Recession unscathed – but the company has been growing since then, and it’s unlikely to fail in its entirety during the next downturn. There are several other market indicators worth paying attention to.

First, the operating income of the company has been mostly flat for some time now. Growing income is better, but holding steady means a company isn’t seeing as much volatility as it could. The company has also been growing its dividend for the last few years, and businesses usually don’t do that if they think they’ll need the money for something else.

However, the benefit of cyclical stocks can only be realized when you buy low and sell high – and this stock is currently pretty high. We recommend waiting for the next downturn to invest in GM.

#3: Genuine Parts Company

Often referred to by its acronym of GPC, this company sells a variety of automotive, industrial, and business products. While they’re affected by the overall market – fewer cars sold means fewer parts sold, too – their market dominance and the need for spare parts regardless of the state of the economy means this business will almost certainly survive the next downturn and resume its growth.

GPC’s diversity is particularly helpful. Products like janitorial supplies may not seem glamorous, but they’re always in demand and provide a degree of predictable income to support GPC through rougher years.

#4: Scientific Games

Most people outside the gaming industry don’t realize how big it is. Scientific Games places particular value on experience-based products like smartphone apps, casino machines, and sports betting. Underlying this is a strong focus on gathering market information and using analytics to drive engagement (and profits).

Gambling, of course, is a field that’s highly influenced by the overall economy. That makes its stock quite volatile, but Scientific Games has enough market presence to endure the downturns. Most helpfully, they’re partnered with businesses in more than 50 countries, and even a severe downturn in one region is unlikely to affect their global operations.

Gambling and casinos aren’t likely to go away, making this a great stock to keep an eye on.

When Is The Best Time To Invest In Cyclical Stocks?
 
The best time to invest in cyclical stocks is usually in the last year before interest rates rise. In general, this is when cyclical stocks are most likely to perform better than growth stocks. This is key – if they’re riskier and provide a smaller return than growth stocks, they’re not worth investing in.
 
At the same time, look for industries that are expected to bounce upward soon. It’s difficult to perfectly time the markets. It’s best to sell cyclical stocks as soon as you feel you’ve gotten enough of a return on your initial investment.
 
Cyclical stocks are poor long-term investments. Especially if you buy them when they’re high. It may take more than a decade for their value to return, and that’s a lot of lost earning potential.
 
For added help, look at insider buying. If company executives are buying a lot of stock, they believe the company is about to recover. If they seem hesitant, hold off until they start sending better signals. Also, keep an eye on the company’s cash flow. If they have a lot of money even when their stock is near its bottom, they’re probably going to recover.

The post What Are Cyclical Stocks and When Should You Invest? appeared first on Dividend Mantra.

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If you’ve ever gotten a gift card to a store you don’t usually shop at, you know that it can be a challenge to figure out what to do. Should you buy something, even if you don’t want it? Or should you hang onto the card and give to someone else as a present?

Cardpool takes some of the stress out of unwanted gift cards. It’s the best place to sell gift cards online. You can also buy gift cards for your favorite stores, for a discount. Our Cardpool review gives you the full scoop on the site and whether it’s worth it or not.

What is Cardpool and How Does it Work?

Cardpool.com is a site that lets you swap gift cards. You can buy cards on the site for a reduced price, often for up to 35 percent off. If you have gift cards you don’t want, you can sell them on the site and get back up to 92 percent of their value.

Is Cardpool legit? It is because you are dealing directly with the company and not with a bunch of unverified third-party sellers. Every gift card offered on Cardpool is verified and comes directly from Cardpool itself. The company buys cards from individual sellers, then sells them to interested buyers.

Every card bought and sold on the site has no fees and no expiration date. Each purchase is guaranteed and includes free shipping

Buying Gift Cards

If you are interested in buying gift cards from Cardpool, the process is pretty simple. You can search the site for the store or company you’re interested in. For example, if you’d like a gift card for J.Crew, you type the store’s name into the search bar.

If gift cards for J.Crew are available for sale, the results will list the value of each card and its cost. For example, a gift card worth $83.59 might cost $74.80, a discount of 10.5 percent.

Cardpool gives you the option of purchasing either paper or email gift cards. If you buy a “paper” card, it’s mailed to you and should arrive within a week. Emailed or “egift” cards usually arrive within a business day, over email.

Whether a gift card is paper or email depends on the type of cards Cardpool purchases. You don’t necessarily get a say in whether your gift card is a physical one or an emailed one, although there might often be a range of options available.

One of the benefits of buying gift cards on Cardpool is that the price that’s printed is the price you pay. The platform offers free shipping and doesn’t charge sales tax or other fees

Selling Gift Cards

Cardpool also lets you sell those gift cards you have cluttering up your wallet or purse. It allows you to sell either paper gift cards or e-gift cards, or both. The gift cards you sell don’t have to have the full balance on them, but they do need to be worth at least $25. The maximum value of each gift card is $1,000.

When you sell a gift card to Cardpool, you have two options for receiving payment. You can trade gift cards for Amazon credit, or you can ask the company to send you a check. If you choose the Amazon option, you’ll get 6 percent more per transaction than if you pick a check.

You also have a choice as to how you sell your card. You can choose the get paid faster option and sell the card directly to Cardpool. If you were to sell a $150 card to the company with the faster option, you’d receive $109.50 in cash or $116 in Amazon credit.

The second option is to list the card on the site’s marketplace. If you do that, you have more of a say regarding the price of the card. For a $150 card, you can choose a price up to $135.68 if you want to get paid in cash or up to $143.82 if you prefer Amazon.

If you’re selling a paper or physical gift card, you don’t have to worry about shipping costs. Cardpool will give you a prepaid USPS label that you can use to send the card to the company, free of charge. If you sell an emailed or e-gift card, you type in the card number and PIN, if needed, before you accept the offer from Cardpool.

Our Two Cents

Here’s our Cardpool review. Whether you’re buying or selling gift cards, Cardpool has some pros and cons. The site can be an excellent way to save money at your favorite stores and a useful tool if you want to trade unused gift cards for cash. Although our Cardpool review is positive, there are a few caveats we think you should know about.

Cardpool is a Great Concept

All in all, Cardpool is a fantastic idea. Whether from well-meaning friends or people who are clueless, many end up with gift cards they just can’t use every year. Instead of having those cards sit in your wallet and be a waste of money, Cardpool gives you the option of making good use of them.

Sure, you won’t get the full value of the card when you sell it to Cardpool. But at the very least, you’re likely to get up to 92 percent of its value. Getting some money is better than getting no money.

If you’re in the market for gift cards, there’s no reason why you shouldn’t use Cardpool. Why pay $150 for a $150 gift card when you can pay $140 for the same value? It just makes good financial sense.

The Execution is Lacking

One of the biggest issues with Cardpool is that some people are sure that they’ve been a victim of a Cardpool scam. That’s mainly because the site has insufficient customer service.

Although it offers a full year guarantee for people who have purchased a card, there don’t seem to be many protections in place for sellers. In fact, Cardpool reserves the right to charge your credit card if it thinks that the card you’ve sold to is a fraud or otherwise illegal. No one wants to wake up to an unauthorized or mysterious charge on their credit card.

There are also issues with getting in touch with the company. Email seems to be your only option for contacting them, as there is no Cardpool phone number.

What Do Other People Say About Cardpool?

We’re not the only ones to have an opinion about Cardpool. Cardpool reviews from other users show that the site is very polarizing. Some people love it, but others are not satisfied.

Some Love Cardpool

Those who love Cardpool love it because they believe it provides a straightforward and easy solution. For example, Dominque D. says this of her experience with the site:

They do what they say they do. The service works. They send the electronic gift cards in a timely manner. Thanks.

Melissa said this of her Cardpool experience:

I have purchased egift cards from Cardpool in the past, and once again I made an effortless, easy purchase. Egift card worked perfectly within seconds of receiving my email. The whole process took about 10 minutes.

Another reviewer, Sean, had this to say:

Great experience – traded 2 gift cards in March 2017 and the process was very quick. Cardpool sent me Amazon gift cards within 24 hours. Would definitely recommend them!

Others Think Cardpool is a Scam

Other Card pool reviews aren’t so great, which can leave many people wondering if Cardpool’s legitimate. For example, the site has nearly 70 negative reviews on the Better Business Bureau website. Many of the reviews concern how long the company takes to send out the gift cards.

How long does Cardpool take? Although the site claims that it takes just a few minutes for emailed gift cards to arrive, Chris had a different experience:

The website stated that purchased gift cards would be available instantly. Purchased two cards, neither were available instantly. The first took over 24 hours and the second took around 6 hours. This business does not live up to their advertised services, and their customer service is poor. I would recommend using one of the other gift card sites.

Steven C.s’ review might sum up what those who haven’t had a good experience with Cardpool are thinking:

This company has zero customer support and little regard for the satisfaction of their customers.

Is Cardpool a scam? The site is probably not a scam, but it could also a do a much better job of making its customers happy.

Cardpool vs. Similar Services

Cardpool might not be the best site to sell gift cards, but the good news is that it’s not the only site out there. Other sites that offer a similar service include:

  • Cardcash. Cardcash has some features in common with Cardpool, but it also lets you trade your gift cards in for other gift cards (not just Amazon credit). If you trade in a card, you get more than if you take a cash offer. Cardcash seems to accept fewer merchants than Cardpool
  • Gift Card Granny. Gift Card Granny is a one-stop shop for your gift card selling needs. It doesn’t buy or sell gift cards itself, but it will tell you where to go to get the most bang for your gift card buck.
  • Card Kangaroo. Card Kangaroo does somethings better than Cardpool and some things worse. It doesn’t let you trade in gift cards for other cards, but it does pay via Paypal or check. The site also only accepts physical gift cards, not emailed cards.

The post Cardpool Review – Find Out If They’re Legit or Not Right Here appeared first on Dividend Mantra.

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